FBL Financial Group Reports Fourth Quarter 2008 Results and Declares Quarterly Dividend.WEST DES MOINES, Iowa West Des Moines is a city in Polk, Dallas, and Warren counties in the U.S. state of Iowa. As of the 2000 census, the city population was 46,403; a special census taken in the spring of 2005 counted 51,744 residents. -- FBL FBL Full Bell Lines (coin grading) FBL Fly by Light FBL FIATA Bill of Lading FBL Functional Baseline FBL Foundation for a Better Life FBL Federal Barge Lines, Inc. Financial Group, Inc.: [TABLE OMITTED] FBL Financial Group, Inc. (NYSE NYSE See: New York Stock Exchange : FFG FFG Forschungsförderungsgesellschaft (German: Austrian research promotion agency) FFG Flash Flood Guidance FFG Guided Missile Frigate FFG Fall from Grace (band) FFG Fast Frigates FFG Freeware Flight Group ) today reported a net loss for the fourth quarter of 2008 of $19.2 million, or $0.64 per diluted di·lute tr.v. di·lut·ed, di·lut·ing, di·lutes 1. To make thinner or less concentrated by adding a liquid such as water. 2. To lessen the force, strength, purity, or brilliance of, especially by admixture. common share, compared to net income of $11.9 million, or $0.39 per diluted common share, for the fourth quarter of 2007. Operating Loss operating loss The excess of operating expenses over revenue. As with operating income, operating losses exclude revenues and expenses from operations that are not considered a regular part of the business. Also called deficit. Compare operating income. ((1)). Operating earnings Operating Earnings Profits after subtracting expenses such as marketing, cost of goods sold, administration and general operating costs from revenue. Notes: Tax and interest expenses are not subtracted - operating earnings are synonymous with EBIT (earnings before totaled a loss of $5.3 million for the fourth quarter of 2008, compared to operating income Operating Income The profit realized from a business' own operations. Notes: This would not include income from things such as investments in other firms. Also referred to as operating profit or recurring profit. of $24.9 million in the fourth quarter of 2007. Operating loss per common share totaled $0.18 in the fourth quarter of 2008 compared to operating income per share of $0.82 in the fourth quarter of 2007. Operating income (loss) differs from the GAAP GAAP See: Generally Accepted Accounting Principles GAAP See generally accepted accounting principles (GAAP). measure, net income (loss), in that it excludes the impact of realized/unrealized gains and losses on investments, the change in net unrealized gains Unrealized Gain A profit that results from holding on to an asset rather than cashing it in and using the funds. Notes: Let's say you own a stock that has doubled, but you haven't sold it yet. This is said to be an unrealized gain. and losses on derivatives derivatives In finance, contracts whose value is derived from another asset, which can include stocks, bonds, currencies, interest rates, commodities, and related indexes. Purchasers of derivatives are essentially wagering on the future performance of that asset. and the cumulative effect of changes in accounting principles. For further information on this non-GAAP financial measure, please refer to Note (1) and the reconciliation provided within this release. Deferred Policy Acquisition Costs Charge. For the fourth quarter of 2008, FBL recorded a pre-tax charge of $29.6 million, or $0.64 per share after tax, in connection with the unlocking of deferred policy acquisition costs and deferred sales inducements (DAC See D/A converter and discretionary access control. DAC - Digital to Analog Converter ) as well as additional amortization of $5.6 million pre-tax, or $0.12 per share after tax. This unlocking adjustment and increased amortization reflects updated surrender and withdrawal rate assumptions on annuities sold through FBL's EquiTrust Life independent distribution channel, as well as lower expected profitability for this business. These assumptions were updated to reflect a very recent increase in surrender requests of EquiTrust Life's index and multi-year guarantee annuity annuity: see insurance. annuity Payment made at a fixed interval. A common example is the payment received by retirees from their pension plan. There are two main classes of annuities: annuities certain and contingent annuities. business due to the impact on policy provisions of a dramatic and rapid decrease in U.S. Treasury U.S. Treasury Created in 1798, the United States Department of the Treasury is the government (Cabinet) department responsible for issuing all Treasury bonds, notes and bills. Some of the government branches operating under the U.S. Treasury umbrella include the IRS, U.S. rates. Capital and Liquidity. FBL estimates 2008 year end company action level risk based capital ratio of approximately 416 percent for Farm Bureau Life Insurance Company and approximately 300 percent for EquiTrust Life Insurance Company. In addition, FBL has more than $80 million available at the holding company. FBL maintains liquidity in the form of short-term investments and cash and cash equivalents, which as of year end 2008 totaled over $300 million. These capital and liquidity positions reflect FBL's steps taken in mid-2008 to slow the pace of sales growth at EquiTrust Life in order to preserve capital and the issuance of $100 million of debt capital in November 2008 from affiliated Farm Bureau entities. As of December 31, 2008, the book value per share of FBL Financial Group common stock, including accumulated ac·cu·mu·late v. ac·cu·mu·lat·ed, ac·cu·mu·lat·ing, ac·cu·mu·lates v.tr. To gather or pile up; amass. See Synonyms at gather. v.intr. To mount up; increase. other comprehensive loss, was $8.46, compared with $29.98 a year ago. This decline reflects a decrease in the market value of investments resulting primarily from increased spreads due to distressed and volatile financial markets. Book value per share, excluding accumulated other comprehensive loss(2), decreased to $30.00 at December 31, 2008, from $31.19 at December 31, 2007. "2008 was by far the most challenging year financially since FBL's inception as a public company. Results for the year were disappointing, and reflect recognition of unfavorable financial and economic conditions," said Chief Executive Officer Jim Noyce. "Despite the challenges brought on by the global economic crisis, our companies are well-capitalized and we have adequate liquidity to fulfill ful·fill also ful·fil tr.v. ful·filled, ful·fill·ing, ful·fills also ful·fils 1. To bring into actuality; effect: fulfilled their promises. 2. our commitments. In addition, Farm Bureau Life's 2008 sales were strong and it continues to generate capital. Our Farm Bureau niche customer base is the foundation of our companies and this franchise is solid." Noyce added, "Looking ahead, we plan to maintain and build upon our capital strength through the management of EquiTrust Life premium levels, strict expense controls and a continual focus on enterprise risk management. These actions are designed to help us navigate (1) "Surfing the Web." To move from page to page on the Web. (2) To move through the menu structure in a software application. through the current challenges and position FBL Financial Group for the future when we return to a more normal environment." Product Revenues Up. Premiums and product charges for the fourth quarter of 2008 increased seven percent to $71.4 million from $66.9 million in the fourth quarter of 2007. Interest sensitive and index product charges increased nine percent, while traditional life insurance premiums increased four percent. Premiums collected(3) in the fourth quarter of 2008 totaled $346.7 million compared to $629.8 million in the fourth quarter of 2007. The Farm Bureau Life distribution channel had fourth quarter 2008 premiums collected of $136.4 million, an increase of 21 percent, reflecting a 144 percent increase in traditional annuity sales, a three percent increase in traditional and universal life insurance sales and a 43 percent decline in variable sales. The EquiTrust Life independent channel had $204.2 million of premiums collected in the fourth quarter of 2008, a decrease of 60 percent from the fourth quarter of 2007, reflecting the deliberate slowdown For articles with similar titles, see Slow Down (disambiguation). A slowdown is an industrial action in which employees perform their duties but seek to reduce productivity or efficiency in their performance of these duties. in sales in order to preserve capital. Investment Income. Net investment income in the fourth quarter of 2008 increased 11 percent to $185.3 million from $166.5 million in the fourth quarter of 2007. This increase is due to an increase in average invested assets resulting primarily from premium inflows from Farm Bureau Life and EquiTrust Life as well as proceeds from additional debt. The annualized annualized Of or relating to a variable that has been mathematically converted to a yearly rate. Inflation and interest rates are generally annualized since it is on this basis that these two variables are ordinarily stated and compared. yield earned on average invested assets, with securities at cost, was 6.17 percent for the year ended December 31, 2008, compared to 6.19 percent for the same period of 2007. At December 31, 2008, 96 percent of the fixed maturity securities in FBL's investment portfolio were investment grade debt securities. Derivative derivative: see calculus. derivative In mathematics, a fundamental concept of differential calculus representing the instantaneous rate of change of a function. Loss. FBL's derivative loss totaled $37.3 million in the fourth quarter of 2008, compared to derivative loss of $52.2 million in the fourth quarter of 2007. The derivative loss reflects the impact of a decrease in the value of the underlying market indices on which call options supporting FBL's index annuity business are based. At the policy anniversary, gains from call options, if any, are passed on to the policyholder Policyholder An individual who owns an insurance policy. in the form of index credits. In accordance Accordance is Bible Study Software for Macintosh developed by OakTree Software, Inc.[] As well as a standalone program, it is the base software packaged by Zondervan in their Bible Study suites for Macintosh. with the accounting rules for derivatives (FAS 133), gains and losses on these call options are generally offset by a corresponding change in the value of index product embedded Inserted into. See embedded system. derivatives. Valuation adjustments made under FAS 133 have no relationship to any write-down in value of an invested asset due to credit concerns. Realized/Unrealized Losses on Investments. In the fourth quarter of 2008, FBL recognized realized/unrealized losses on investments of $25.8 million compared to $0.8 million in the fourth quarter of 2007. The realized/unrealized losses on investments of $25.8 million are attributable to gains on sales of $1.0 million, losses on sales of $2.2 million and losses due to securities that were deemed other-than-temporarily impaired of $24.6 million. These other-than-temporary impairments, which after taxes and other offsets total $9.2 million, include write-downs to securities issued by Kaupthing Bank Kaupthing Bank (Icelandic: Kaupþing banki) (, OMX Stockholm: KAUP SEK) is an Icelandic bank, headquartered in Reykjavík, Iceland. It was formed by the merger of Kaupthing and Búnaðarbanki Íslands in 2003 and is the largest bank in Iceland. of Iceland, General Motors, Ford Motor Company, Circuit City, AbitibiBowater and others. Benefits and Expenses. Benefits and expenses totaled $229.8 million in the fourth quarter of 2008, compared to $171.7 million in the fourth quarter of 2007. The increase in benefits and expenses is mainly attributable to the increase in DAC amortization from the previously mentioned unlocking charge. In addition, total death benefits increased to $25.8 million in the fourth quarter of 2008 compared to $20.2 million in the year ago quarter. By its nature, mortality experience can fluctuate from quarter to quarter. As previously reported, FBL has taken several actions to reduce expenses in recent months, including workforce reductions, eliminating open positions, streamlining operations and freezing executive salaries. Further Financial Information. Further information on FBL Financial Group's financial results, including investment detail and results by segment, may be found in FBL's financial supplement, available on FBL's website, www.fblfinancial.com, and in FBL's 2008 Form 10-K Form 10-K A report required by the SEC from exchange-listed companies that provides for annual disclosure of certain financial information. Form 10-K See 10-K. , filed today with the Securities and Exchange Commission. Guidance. Due to volatile market conditions and the extraordinary events affecting financial companies, FBL will not provide 2009 earnings guidance. FBL management will discuss their outlook for the future, overall market conditions and fourth quarter 2008 financial results on their conference call with investors as scheduled below. Quarterly Dividend. FBL's Board of Directors declared a quarterly cash dividend of $0.125 per share on its Class A and Class B common stock. The dividend will be payable on March 31, 2009 to shareholders of record as of March 13, 2009. There are 28,976,158 shares of Class A common stock and 1,192,990 shares of Class B common stock, for a total of 30,169,148 common shares outstanding. Conference Call. The call will be held tomorrow, February 20, 2009, at 11 a.m. Eastern Time. The call will be webcast over the Internet, and a replay will be available on FBL's website, www.fblfinancial.com. Certain statements in this release concerning FBL's prospects for the future are forward-looking statements forward-looking statement A projected financial statement based on management expectations. A forward-looking statement involves risks with regard to the accuracy of assumptions underlying the projections. intended to qualify for the "safe harbor Safe Harbor 1. A legal provision to reduce or eliminate liability as long as good faith is demonstrated. 2. A form of shark repellent implemented by a target company acquiring a business that is so poorly regulated that the target itself is less attractive. " from liability established by the Private Securities Litigation Reform Act The Private Securities Litigation Reform Act of 1995 (PSLRA) implemented several significant substantive changes affecting certain cases brought under the federal securities laws, including changes related to pleading, discovery, liability, class representation and awards fees and . These statements generally can be identified by their context, including terms such as "believes," "anticipates," "expects," or similar words. These statements involve certain risks and uncertainties that could cause actual results to differ materially from those expressed or implied in the forward-looking statement. These risks and uncertainties are detailed in FBL's reports filed with the Securities and Exchange Commission and include, but are not limited to, the current difficult financial markets, the current state of the economy, lack of liquidity and access to capital, investment valuations, interest rate changes, competitive factors, the ability to attract and retain sales agents and a decrease in ratings. These forward-looking statements are based on assumptions which FBL Financial Group believes to be reasonable; however, no assurance can be given that the assumptions will prove to be correct. FBL Financial Group is a holding company whose primary operating subsidiaries An operating subsidiary is a business term frequently used within the United States railroad industry. In the case of a railroad, it refers to a company that is a subsidiary but operates with its own identity and rolling stock. are Farm Bureau Life Insurance Company and EquiTrust Life Insurance Company. FBL underwrites, markets and distributes life insurance, annuities and mutual funds to individuals and small businesses. In addition, FBL manages all aspects of two Farm Bureau affiliated property-casualty insurance companies for a management fee. For more information, please visit www.fblfinancial.com. [TABLE OMITTED] (1) Reconciliation of Net Income (Loss) to Operating Income (Loss) - Unaudited In addition to net income (loss), FBL Financial Group has consistently utilized operating income (loss), a non-GAAP financial measure commonly used in the life insurance industry, as a primary economic measure to evaluate its financial performance. Operating income (loss) equals net income (loss) adjusted to eliminate the impact of realized/unrealized gains and losses on investments, the change in net unrealized gains and losses on derivatives and the cumulative effect of changes in accounting principles. FBL uses operating income (loss), in addition to net income (loss), to measure its performance since realized/unrealized gains and losses on investments and the change in net unrealized gains and losses on derivatives can fluctuate greatly from quarter to quarter, and the cumulative effect of change in accounting principles is a nonrecurring item. These fluctuations make it difficult to analyze core operating trends. In addition, for derivatives not designated as hedges, there is a mismatch mismatch 1. in blood transfusions and transplantation immunology, an incompatibility between potential donor and recipient. 2. one or more nucleotides in one of the double strands in a nucleic acid molecule without complementary nucleotides in the same position on the other between the valuation of the asset and liability when deriving net income (loss). This non-GAAP measure is used for goal setting, determining company-wide short-term incentive compensation and evaluating performance on a basis comparable to that used by many in the investment community. FBL believes the combined presentation and evaluation of operating income (loss), together with net income (loss), provides information that may enhance an investor's understanding of FBL's underlying results and profitability. A reconciliation of net income (loss) to operating income (loss) is provided in the following table (dollars in thousands, except per share data): [TABLE OMITTED] (a) Net of adjustments, as applicable, to amortization of unearned revenue Unearned Revenue When an individual or company receives money for a service or product that has yet to be fulfilled. Notes: For example, prepayment on a lease contract - the revenue is a liability until it has been earned. See also: Earned Income, Passive Income reserves, deferred policy acquisition costs, deferred sales inducements, value of insurance in force acquired and income taxes attributable to these items. (2) Reconciliation of Book Value Per Share Excluding Accumulated Other Comprehensive Loss - Unaudited [TABLE OMITTED] Book value per share excluding accumulated other comprehensive loss is a non-GAAP financial measure. Accumulated other comprehensive loss totaled $649.8 million at December 31, 2008 and $36.3 million at December 31, 2007. Since accumulated other comprehensive loss fluctuates from quarter to quarter due to unrealized changes in the fair market value of investments caused principally by changes in market interest rates, FBL believes this non-GAAP financial measure provides useful supplemental information. (3) Premiums Collected - Net statutory premiums collected, a measure of sales production, is a non-GAAP measure and includes premiums collected from annuities and universal life-type products. For GAAP reporting, these premiums received are not reported as revenues. [TABLE OMITTED] FFG-1 |
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